Singapore holds the distinction of being home to the world's best-performing real estate investment trust (REIT) market, according to new data compiled by Bloomberg.
The $38 billion Singapore REIT market reported an average return of 37% this year, which is twice the gains recorded in the U.S., British and Japanese REIT markets. Singapore's REIT market is not the largest in the region – Australia's market is worth $86 billion, but only advanced 24% this year.
What is the secret to Singapore's success? The Bloomberg data shows that property trusts in Singapore offered an average 413 basis points (bps) income return premium relative to 10-year government bonds, while Australia averaged 192 bps. Singapore's REIT market also yielded dividends of 6.47%, compared to 5.01% in Australia.
Furthermore, the city-state's generous tax incentives – with exemptions on foreign income received by Singapore-listed REITs and the distribution of at least 90% of their income as dividends to unit holders – helped to keep the market active.
‘Singapore remains amongst the last few AAA-rated economies,’ says Priyaranjan Kumar, Singapore-based regional director of the capital markets group at broker Cushman & Wakefield, in an interview with Bloomberg. ‘Its real estate market has received unprecedented attention from most investors, as it's seen to offer a good proxy for the increasingly recognized strength of the Asian consumer.’